May off guard over Scottish referendum

Nationalists learn 2014 lessons

by David Marsh in London

Tue 21 Mar 2017

UK Prime Minister Theresa May and her government, fighting a battle on many fronts over Britain’s European Union exit, have been caught off guard by the sudden upsurge in support for a new referendum on Scottish independence.

Part of this is due to the British government’s actions in overdoing the bid for a ‘hard Brexit’, which would cut ties to the single market. This is anathema to the European-minded Scots – and has directly incited a campaign for a second plebiscite following the September 2014 independence vote that maintained Scotland’s union in the UK.

When May became prime minister in July, she made initial efforts to forge links with Nicola Sturgeon, leader of the independence-seeking Scottish National Party and first minister in the devolved Scottish government. May promised Sturgeon that the British government would adopt an EU exit path aligned with Scotland’s own special interests. To many SNP supporters, May’s decision, sealed at the beginning of the year after months of prevarication, for Britain to quit the single market as well as the EU contravenes that undertaking.

There are signs that the SNP has learned lessons from 2014 and is taking a more considered view of currency and financial matters in a post-independence Scotland.

The SNP’s somewhat naive belief in 2013-14 that Scotland could leave the UK but keep sterling – flying in the face of the lesson of monetary unions over the ages: political and monetary integration go together – greatly handicapped the party’s attempt to win credibility 30 months ago.

The SNP now says that Scotland would use the pound in a transitional arrangement but would then need to adopt its own currency rather than joining the euro or relying on the Bank of England. Adhering to the European single currency would be technically and politically problematic for both Scotland and for present euro members.

Yet setting up an independent Scottish currency, too, would be a massively complex operation. The new money would need to be backed by a central bank equipped with monetary reserves as well as arrangements for supervising Scottish banks. It would have to cope with problems for the Scottish economy caused by an oil price that will probably stay relatively low for longer than was considered in 2014-15.

Latest EU developments, igniting nationalist feeling in Scotland after the previous referendum was supposed to lay the question to rest for a generation, have massive potential to disrupt UK financial markets and sterling, already vulnerable to the multiple vicissitudes of the EU withdrawal talks.

Politics is much more confused, and the choices even less straightforward, than in 2014. Should a referendum take place in the next few years, Scottish voters will face a much more difficult decision over which route to take.

In the 23 June EU referendum, Scotland chose by 62% to 38% to stay in the EU, ending up on the losing side of the overall 52% to 48% UK vote against EU membership. In the 2014 referendum, the option of staying in the UK – which the Scottish electorate then backed by 55% to 45% – appeared the more secure choice. Now that the UK has decided to leave the EU, some pro-Europeans on both sides of the Scottish-English border believe a safer choice might be to seek to stay in the EU as a separate state when the other parts of the UK leave.

Sturgeon told an SNP party conference at the weekend that a new independence referendum would take place soon. But she left open how she could force a second vote – which requires UK government approval to attain constitutional validity – and when it would be held.

The Scottish parliament is expected to approve on Wednesday a formal request to Westminster for the power to hold a referendum. Sturgeon has said it should take place by spring 2019 at the latest. May has already ruled out a vote until much later, saying that an earlier plebiscite would badly interfere with the exit process and would anyway require the Scots to vote on the basis of incomplete information about the UK’s post-Brexit arrangements.

The SNP’s struggle is favoured by a lack of credible figures who could lead any anti-independence campaign. Gordon Brown, the former prime minister and chancellor of the exchequer, and Alistair Darling, former chancellor, who campaigned decisively against independence in 2014, both stepped down from frontline politics shortly afterwards. Whatever happens in the next few years, the path to a new Scots independence vote will be an arduous journey.